WHEN SHOULD A PRACTITIONER REMOVE THEMSELVES FOR A “CONFLICT OF INTEREST”? [1]
PART A – INTRODUCTION
1. An important question may arise during legal proceedings as to whether a “conflict of interest” has arisen causing a solicitor to consider whether they should remain acting for their client or otherwise cease acting.
2. A “conflict of interest” is most commonly thought to arise in the context of an allegation of the misuse of confidential information. However, when considering this issue a surprising number of principles may be brought into play, including:
(a) the law of contract;
(b) the law of fiduciary duty;
(c) the law protecting confidential information;
(d) the law in respect of legal professional privilege;
(e) the law with respect to the solicitor’s duty to the court;
(f) the law in connection with the court’s inherent discretion to supervise the conduct of its officers; and
(g) the law which derives from the numerous ethical principles and rules developed by professional disciplinary bodies.
3. After an extensive review of the law, Brooking JA in Spincode Pty Ltd v Look Software Pty Ltd,[2] helpfully summarised three possible grounds for restraining a practitioner for a “conflict of interest”. They were:
(a) the danger of misuse of confidential information (the “First Ground”);
(b) a breach of a fiduciary duty of loyalty not to act against a client, or against a former client in the same matter or a closely related matter (the “Second Ground”); and
(c) the inherent jurisdiction of the court to control the conduct of solicitors and counsel as officers of the court (the “Third Ground”).[3]
4. Whilst some controversy surrounds the Second Ground (namely whether a fiduciary duty extends beyond a solicitor-client retainer), Brooking JA’s three grounds do provide a useful framework within which to examine this area of law.
5. This article will explore each of the above grounds primarily through an examination of the case law as its developed, highlighting any differences between the Family Law jurisdiction and the Civil Law jurisdiction.
PART B – THE FIRST GROUND: MISUSE OF CONFIDENTIAL INFORMATION
Preliminary comments
6. When considering the misuse of confidential information under the First Ground, courts operating in the Family Law jurisdiction have now adopted a “Broader Test” whilst courts operating within the Civil Law jurisdiction have adopted a “Narrow Test”.
7. The essential difference between the “Narrow Test” and the “Broader Test” is the burden of evidence required in order to succeed in an order for injunctive relief. In short, Courts operating within the Family Law jurisdiction are more likely to grant injunctive relief due to the special nature of that jurisdiction.[4]
8. Pursuant to the “Narrow Test”, favoured by the Civil Law jurisdiction, a court will restrain a practitioner upon being convinced, that:
(a) the practitioner holds a specific confidence which was disclosed by a former client; and
(b) there exists a “real and sensible” possibility of that confidence being abused.[5]
9. On a practical level, the “Narrow Test” requires an applicant to articulate within his or her supporting affidavit material, the specific confidence which has been imparted to their former practitioner and how that confidence might be used to their disadvantage in the current proceeding. If an applicant is unable to specify the confidence and/or is unable to articulate the prejudice, then the Courts are unlikely to grant injunctive relief within the Civil Law jurisdiction.
10. Pursuant to the “Broader Test”, favoured by the Family Law jurisdiction, a court will restrain a practitioner upon being convinced, that:
(a) there is a reasonable apprehension (i.e. a prima facie case) that confidential information has been imparted to a practitioner by a former client; and
(b) there is a threat or at least a “theoretical possibility” that such confidential information might be used to the disadvantage of that client.[6]
11. On a practical level, the Broader Test does not require an applicant who is seeking to restrain a practitioner to specifically articulate the precise confidence which is said to have imparted to their former practitioner, nor the specific manner in which they are to be prejudiced. Rather, all that is necessary is that the applicant swears that he or she has conveyed confidential information to the solicitors and that he or she believes, not unreasonably, that the information may be used against him or her, or at least to his or her disadvantage in the current proceeding.[7]
12. From the above it is clear that the burden of evidence in the Family Law jurisdiction is much lower than its Civil Law counterpart, however practitioners in the Family Law jurisdiction ought not be drawn into a false sense of security that there is no burden of evidence.
13. An examination of the case law below demonstrates how each test has developed in each jurisdiction.
Mills v Day Dawn Block Gold Mining Co Ltd (1882) 1 QLJ 62
14. In Mills v Day Dawn Block Gold Mining Co Ltd (hereinafter “Mills”),[8] a plaintiff sought to restrain the solicitors of the defendant on the basis that a solicitor who had acted as town agent for the plaintiff had now become employed by the defendant.
15. The plaintiff complained that the defendant’s solicitor, by way of his previous engagement, was in possession of confidential information. Meanwhile the solicitor in question denied that he was in possession of any confidential information claiming that any knowledge that he had was freely available to anyone in the public.
16. At first instance, Pring J, noted that the allegation was too general and that it failed to directly allege any prejudice to the interests of the plaintiffs. On that basis, the Court held that there were insufficient grounds for a restraint.
17. The Full Court of Queensland ultimately overturn the decision at first instance and granted injunctive relief. In doing so Lilley CJ held as follows:
“It is the duty of the attorney not to place himself in such a relationship as might lead to there being an unwitting breach of duty.
…
If they (the judges) were to insist upon actual proof of the existence of such confidence, and to insist upon knowing what it was, and whether it was likely to prejudice a client's interests, they would compel him to strip himself of the protection which the court usually afforded, and the whole mischief he wished to avoid might arise. As it seemed to him, on the one side the client insisted on oath that he had imparted confidence to Mr Marsland; and, on the other side, the solicitor said, `I have no confidence.' How could the court decide it? If they took the oath of the attorney against the oath of the client, and refused the protection which the client sought, why, then, the matter might proceed, and the mischief which the client feared might arise, and the court could afford no remedy. In cases of this kind less mischief would accrue through granting the protection sought than in accepting the oath of the attorney against the client. The client's interest should prevail, and the judge should refuse to determine the matter on the conflicting testimony of affidavits.''[9] [emphasis added]
18. As will soon become apparent, the decision of Mills has been adopted (with other decisions) by the Courts operating in the Family Law jurisdiction in the development of the “Broader Test”. Meanwhile, it has not been followed by Courts operating in the Civil Law jurisdiction.
Rakusen v Ellis, Munday and Clarke [1912] 1 Ch 831
19. In Rakusen v Ellis, Munday and Clarke (hereinafter “Rakusen”),[10] solicitors by the name of Munday and Clarke were partners in a firm and were in the habit of doing business separately and without any knowledge of the each other’s clients.
20. Mr Rakusen (the client) consulted with Mr Munday with reference to a wrongful dismissal claim against a company. During this time the other Partner, Mr Clarke, was away on vacation out of the country and knew nothing of the consultations between Mr Rakusen and Mr Munday. Mr Rakusen subsequently changed solicitors. The matter was ultimately referred to arbitration where Mr Clarke, who had no previous involvement, was engaged by the defendant company for the arbitration.
21. Mr Rakusen brought an application seeking an injunction restraining the entire firm, including Mr Clarke, from acting for the defendant company on the basis that Mr Rakusen had previously consulted with Mr Munday.
22. Warrington J at first instance granted injunctive relief on the basis that a solicitor, having once been employed to act for a man should not act against him in the same matter.
23. However, on appeal, the English Court of Appeal held:
“...there is no general rule that a solicitor who has acted in a particular matter for one party shall not under any circumstances subsequently act in that matter for his opponent. Whether he will be restrained from so acting or not depends on the particular circumstances”.[11] [emphasis added]
24. Accordingly the Court of Appeal reversed the decision of Warrington J. by holding that the injunction must be refused.
25. Whilst Rakusen forms the basis of the “Narrow Test” (adopted by the Civil Law jurisdiction) it is relevant to note that the test which it developed, for when injunctive relief was necessary is no longer considered good law in Australia.[12]
In the marriage of RA and E Thevenaz (1986) 11 Fam LR 95
26. In the case of Thevenaz (hereinafter “Thevenaz”),[13]a husband sought to restrain his wife’s solicitor from acting for her in relation to property adjustment proceedings on the basis that a former partner of the solicitor had previously acted for the husband and the wife jointly and that those files were still held by the solicitor’s firm.
27. The wife’s solicitor asserted that he himself had no independent or actual knowledge of the prior conveyancing transactions, because it was a former Partner of the firm that had acted for the husband and wife jointly. However the Court held that as a matter of agency the solicitor was deemed to have the knowledge of all Partners, including former Partners.[14]
28. The Family Court held in favour of the husband by restraining the wife’s solicitors, holding (per Frederico J):
“It is my view that in this case Mr Dezarnaulds should not continue to act on behalf of Mrs Thevenaz. It may well be that the risks were he to do so are more theoretical than practical. However, it is asserted and not contradicted that material in the files does relate to confidences exchanged in the course of the former firm previously acting on behalf of both parties and would embarrass the husband. It is of the utmost importance that justice should not only be done but should appear to be done. In the circumstances of the present case, there is a risk which may well be merely theoretical but still exists, that justice might not appear to be done.” [emphasis added]
29. The case for Thevenaz is often cited as authority for the “Broader Test” and the proposition that there need only be a “theoretical risk” of prejudice arising from the misuse of confidential information in the Family Law jurisdiction in order for the Court to provide injunctive relief.[15]
D&J Constructions Pty Ltd v Head and Others trading as Clayton Utz (1987) 9 NSWLR 118
30. In the case of D&J Constructions Pty Ltd v Head and Others trading as Clayton Utz (hereinafter “D & J Constructions”),[16]the defendant in a proceeding (D&J Constructions Pty Ltd) sought to restrain the plaintiff’s solicitors (Clayton Utz), on the basis that they had previously acted for a shareholder of D & J Constructions (not the entity itself) and thus was in possession of confidential information relevant to the current proceeding. There was no actual evidence of Clayton Utz being in receipt of confidential information.
31. Bryson J declined the injunctive relief sought stating that theoretical risks should be disregarded and favouring, in the context of a civil dispute, the test emanating from Rakusen stating at 122:
“I think that Rakusen's case points the way I should go, although there was in that case the important element of identity of the former client with the later opponent. The existence of a proved risk of misuse of confidential information appears to me to be very important if the plaintiff is to succeed.” [emphasis added]
32. In the course of his Honour’s judgement, the Court went on to distinguish the approached adopted within the Family Law jurisdiction in the case of Thevenaz:
“There was recent consideration of the circumstances in which a solicitor would be restrained from acting for a former client by the Family Court of Australia (Frederico J) in In the Marriage of Thevenaz (1986) FLC 91-748; 11 Fam LR 95. That Court took the view that restraint is justified if there is a risk that confidential communications on relevant matters have been made by the party for whom the solicitor has ceased to act, even if the risk may be more theoretical than practical. It seems natural that a particularly careful view would be taken in family law business, as such litigation tends to be about highly confidential facts and a very wide range of facts and circumstances can conceivably be relevant; the sensitivity which even the most reasonable people feel about such litigation when they are engaged in it calls for careful measures to secure not only that justice is done but also that it is apparent that it is done, an appearance which would not survive any general impression that lawyers can readily change sides.” [17] [emphasis added]
33. The above underlined quote is often cited in support of the proposition that Family Law matters are of a special character requiring a more cautious approach to be adopted when considering such applications to restrain solicitors.
In the Marriage of PA and R M Magro (1989) 12 Fam LR 770
34. In the case of In the Marriage of PA and R M Magro (hereinafter “Magro”), [18] the Courts acknowledged that there existed two completing evidentiary tests, but found it unnecessary to resolve the conflict between the two because the facts satisfied both tests.
35. In this case a wife sought to restrain the husband’s solicitors on the basis that a solicitor, who the wife previously retained in her family law matter, had become employed by the husband’s solicitor, but was not working on the conflicted file.
36. It was alleged and not disputed that the newly employed solicitor had previously undertaken approximately 35 hours of conferences and telephone attendance with the wife and that the wife had provided him with approximately 75 pages of written instructions relating to the family law proceeding during his previous employment.
37. The husband’s solicitors attested that the newly employed solicitor had not had any contact with the matter since his employment with the firm. Furthermore it offered and undertakings to the same effect for the newly employed solicitor’s future conduct.
38. The husband’s solicitor further argued, in reliance of Rakusen (which advocated the “Narrow Test”), that the wife had failed in proving the burden of evidence in that she had not actually articulated within her affidavit material any specific confidences which were in danger of being improperly used and thus it could not be said, as submitted by the husband, that there existed a real mischief and/or a real prejudice to the wife.
39. The Court disagreed with the husband holding that the husband’s solicitors were in receipt of at least one confidential document that this it was reasonable to assume that the new firm was in possession of further privileged material which could be put to use by the husband. [19]
40. Rourke J found it unnecessary to resolve the apparent conflict between the formulation contained in Thevenaz (that justice must be seen to be done even if the risk is more theoretical than practical) and that contained in Rakusen (the court will not interfere unless the “mischief is rightly anticipated), because in his Honour’s view the facts satisfied both tests. To that end, he held:
“In the present proceedings I do not find it necessary to resolve the apparent conflict of principle as between Thevenaz on the one hand and Rakusen, Sogelease and D & J Constructions Pty Ltd on the other. I find for the reasons appearing above that as a matter of probability there is in fact a real risk of injustice being done to the wife if the present situation is allowed to persist. That is to say, I am satisfied that the conditions for injunctive relief as formulated in Rakusen have been satisfied in the present case. A fortiori, I am also satisfied, in accordance with what I perceive to be the ratio of Thevenaz, that for Mr Malouf to continue to represent the husband in these proceedings would be subversive of the appearance of justice and would amount to a denial of natural justice.” [emphasis added]
In the Marriage of A and B (1990) FLC 92-126
41. In the case of In the Marriage of A and B,[20] the wife sought to restrain solicitors and junior counsel acting for the husband on the basis that they had previously represented the wife’s new partner in respect of his previous matrimonial proceeding.
42. It was argued by the wife that the husband’s solicitors, having previously represented the wife’s new partner, were in possession of detailed information which was provided in confidence which could be used now against the wife.
43. The court agreed and restrain the husband’s solicitors stating (where “C” was the named given to the wife’s new partner):
“In these circumstances, in my view, the appearance of the situation is that if C's former solicitors continue to act for the husband the wife will be prejudiced unfairly. Moreover I am of the opinion, that in fact as well as appearance, the wife would be likely to suffer unfair prejudice. Other solicitors for the husband would not have the benefit in this case of confidences and candid instructions given to them by C.
It is implicit in the foregoing view that the husband's solicitors would be entitled to use the information they received from C in the case against the wife. It is hard to believe that in practice they could distinguish accurately between that information and the information they might receive from the documents on the record in C's proceedings. Put another way, it is hard to see that they could actually conduct this case without having and using the benefit of the instructions of C in his litigation. It would be difficult to ignore or forget the information and insights that they obtained.
In the case of Thevenaz and Thevenaz (1986) FLC ¶91-748, Frederico J. stated that a solicitor had a duty to a client to put at his disposal not only his skill but also his relevant knowledge; otherwise he should not act. He referred to the case of Spector v. Ageda (1973) 1 Ch. 30, in this respect.
In all of the circumstances I believe that the information imparted by C to the solicitors would be likely to be used in so far as it might help the husband in his case against the wife.”
In the Marriage of KR and SM Griffis (1991) 14 Fam LR 782
44. In Griffis, a husband sought to restrain the solicitor of a wife acting for her in a matrimonial dispute on the basis that the solicitor had previously been engaged by the husband and wife jointly in the structuring of their personal and business arrangements and where in the course of such an engagement the husband had provided the solicitor with various confidential documents and records relating to his business and his earnings.
45. In the course of judgement the Family Court of Australia (per Mullane J) considered what degree of proof, of the passage of confidential information, a former client had to establish in order to have that information protected. His Honour’s view was that:
“…the former client be required only to prove a prima facie case as to confidential material, the disclosure or use of which by the solicitor in the course of the conduct of the current proceedings for the present client would be prejudicial to the applicant.”[21] [emphasis added]
46. The Family Court of Australia were ultimately satisfied that the husband had established a prima facie case that the wife’s solicitor was in possession of confidential information (namely business records and other company documents) which would be prejudicial to the husband in the property adjustment proceeding.
47. Having been convinced that the wife’s solicitors were in possession of confidential information, the Court next considered the prejudice to the husband:
“It is easy to contemplate types of information which are likely to be contained in such documents. Examples are profit figures, expense figures, wages paid, expenditures for purchase of items of property, details of suppliers and details of cash receipts recorded. It is easy to recognise ways in which such information could, even without disclosure to the wife, be used by the solicitor to the prejudice of the husband. It could give rise to the issue of subpoena to the husband or others for production of records, or to recruitment of particular witnesses. It could be the basis of some cross- examination of the husband. It could be used to attack his case or his credit.” [22]
Farrow Mortgage Services Pty Ltd (in Liq) v Mendall Properties Pty Ltd and Others [1995] 1 VR 1
48. In the case of Farrow Mortgage Services Pty Ltd (in Liq) v Mendall Properties Pty Ltd and Others (hereinafter “Farrow”),[23] the Plaintiff sought to restrain the solicitors of the third and fourth defendants on the basis that they had previously been engaged by the Plaintiff’s liquidator who had been previously been appointed as a provisional liquidator of a building society of which the plaintiff was a member. Further in that regard, the Plaintiff made the complaint that during their appointment the solicitors for the third and fourth defendants had access to a briefing paper which dealt with the actions which were in issue now.
49. The third and fourth defendants' response was that even if such information had been conveyed and had been conveyed in confidence, the material concerned was no longer confidential because it had been published in the course of other court proceedings and had been published by the liquidator in reports that he had made in fulfilment of its statutory duties.
50. After examining the numerous authorities the Court concluded that the appropriate test to be satisfied before granting injunctive relief was that articulated by Ipp J in Mallesons Stephen Jaques v KPMG Peat Marwick (19990) 4 WAR 357, that an injunction should be granted if there is a real and sensible possibility of the misuse of confidential information:
“Although it is necessary to be acutely conscious of the fact that the court is asked to interfere with the right of a litigant to be represented by the solicitor of the litigant's choice, it is not necessary to conclude that harm is inevitable (or well nigh inevitable) before acting to restrain a possible breach of the duty that a solicitor owes to clients and former clients to keep confidential information given to the solicitor in confidence and not use that information against the interests of the client who gave it to the solicitor. ...It is enough to say that I consider that injunction should go if there is a real and sensible possibility of the misuse of confidential information.[24] [emphasis added]
51. Having adopted the “real and sensible” test, the Court held:
… I consider that the firm should be precluded from continuing to act for the third and fourth defendants in this matter. It is clear, in my view, that a reasonable person, informed of the facts, might reasonably anticipate a danger of the misuse of confidential information and that there is a real and sensible possibility that the interest of the firm in advancing the case of the third and fourth defendants in the present proceeding might conflict with its duty to keep the information given to it by its former client confidential and to refrain from using that information to the detriment of its former client.”
52. Practitioners in the Family Law jurisdiction should note that the “real and sensible” test as applied in Farrow has been distinguished and held not to apply in the Family Law jurisdiction.[25]
McMillan and McMillan [2000] FamCA 1046
53. The case of McMillan and McMillan (hereinafter “McMillan”),[26] is perhaps considered to be the leading authority for the Family Law jurisdiction and is often cited as authority for the proposition that the Courts should adopt the “Broader Test” in Family Law proceedings when considering an allegation of misuse of confidential information.
54. In McMillan a husband sought to restrain the solicitors of the wife on the basis that a non-legally qualified law clerk who had previously been employed by the solicitors acting in the proceedings for the husband, and who had in the course of that employment worked on the husband’s case, had moved to work as a secretary to the wife’s solicitor.
55. The husband attested within his supporting affidavit material that during the course of his retainment with his solicitors he had occasion to speak directly with the law clerk by telephone and provided instructions to him as to how he wished the matter to be conducted and the position he wished to be put to the wife.
56. At first instance, Wilczek J favoured the “Broader Test” over the “Narrow Test” by restraining the wife’s solicitors.
57. On appeal the Full Court of the Family Court of Australia (per Finn, Kay and Moore JJ) confirmed that the “Broader Test” ought to be adopted in family law proceedings and that the burden of evidence to satisfy same was firstly, a prima facie case as to confidential information and secondly, a reasonable belief that the holding of such confidential information would be prejudicial. In that regard, the Court held:
“[83] Again we have already discussed the two approaches to the question of when a solicitor who has received confidential information from a client will be restrained from acting against that client. We have concluded that to the extent that it is necessary for us to determine that matter in this case, the broader approach based on Mills is to be preferred.
…
[86] Again, as earlier indicated, we adopt what was said by Mullane J in Griffis, in reliance on Mills and Thevenaz, that the client need only prove “a prima facie case as to confidential material, the disclosure or use of which by the solicitor in the course of the conduct of the current proceedings for the present client would be prejudicial to the applicant.
[87] In other words, the client need only give evidence that he has provided confidential information to the solicitor (or in this case, the law clerk/secretary). The client does not have to divulge the content of that information: see Mills and also Lindenmayer J in Stewart. In the present case, we consider it sufficient, as we said earlier, that the husband has sworn that he had given instructions to Mr Pitts as to how he wished his “matter to be conducted and the position to be put to the wife”. It is obvious that such matters would come within the description of “confidential information”.
[88] As to the question of “prejudice”, it is true that the husband never alleged actual “prejudice” in the sense of using that word in his affidavit. However, he did state that the information could be “used against” him in the proceedings. That must be prejudice. In any event, a careful reading of the relevant passage from Mills (see [42] above) shows that the court should not require proof of prejudice: again see Lindenmayer J in Stewart.” [emphasis added]
Potential defences to an application seeking injunctive relief
58. Although it is outside the scope of this paper to examine the utility of defences, a respondent might consider the following:
(a) firstly, if an applicant seeking injunctive relief never attended upon the former practitioner solely during the past retainer (i.e. the former joint parties always attended upon their former solicitor together) then arguably it could be said that no confidential information has been imparted;
(b) secondly, if the past transaction which the former practitioner acted on does not bear any issue in the current proceeding then it might be difficult to argue that a prejudice exists;
(c) thirdly, if the applicant has unduly delayed in bringing their application, it might be said that the prejudice to the respondent outweighs the prejudice to the applicant; and
(d) fourthly (and perhaps more relevant to disciplinary proceedings for the misuse of confidential information), has the former client provided their written and fully informed consent to the practitioner to act with the conflict.
PART C – THE SECOND GROUND (BREACH OF FIDUCIARY DUTY)
59. As all practitioners will appreciate, the existence of a fiduciary relationship (i.e. one of loyalty) during a legal retainer is not controversial. However, Brooking JA in Spincode Pty Ltd v Look Software Pty Ltd went further by holding that practitioners owed a fiduciary duty to their former clients, after the expiry and/or termination of the retainer. That view has been met with substantial controversy.
60. It is outside the scope of this paper to visit that controversy although in Queensland it is relevant to note that the case of Flanagan v Pioneer Permanent Building Society Ltd [2002] QSC 346 has expressly rejected the notion whist the case of Pott v Jones Mitchell [2004] QSC 48 has left the question open.
61. This topic will be addressed in a further paper.
PART D – THE THIRD GROUND (THE “INHERENT JURISDICTION” OF THE COURT)
Preliminary comments
62. The Third Ground is invoked where a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting.
63. The Third Ground might potentially arise, where:
(a) the solicitors of a party have a pecuniary interest in the outcome of the proceeding;
(b) the solicitors of a party are likely to be called themselves as a witness;
(c) the solicitors of a party have some type a pre-existing family or social or business relationship with one party; and/or
(d) the solicitors of party have previously acted in some form of criminal or prosecution proceeding against the other party.
64. The basis of the Third Ground is said to derive in part from the principle that, “justice should not only be done but it should be seen to be done”.
65. The below cases demonstrate the principles which arise when considering an application based upon the Third Ground.
Mallesons Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357
66. In Mallesons Stephen Jaques v KPMG Peat Marwick (hereinafter “Mallesons v KPMG”),[27] a firm of accountants, KPMG, sought the advice of a law firm known as Mallesons in regard to the manner in which they had conducted certain audits of a company named Rothwells Ltd.
67. During the course of seeking advice KPMG provided Mallesons with confidential information. Mallesons provided their advice to KPMG and the retainer was subsequently terminated.
68. Two years later Mallesons were retained by the Commissioner for Corporate Affairs to act as its solicitors in connection with the criminal prosecution of numerous individuals who were partners and/or employees of KPMG. The KPMG employees subsequently sought injunctive relief restraining Mallesons from acting for the Commissioner on the basis that Mallesons was in recept of confidential information.
69. In response Mallesons argued that there was no breach of confidential information due to the fact that different partners were working on the matter and that there existed effective Chinese Walls.
70. The Court ultimately granted in injunction primarily on the basis of public interest considerations, holding at page 374:
“It cannot be sufficiently emphasised, in my opinion, that litigation involving the prosecution of serious criminal charges calls for the most careful measures to secure not only that justice is done, but also that it is apparent that it is done. More than in any other kind of litigation, the appearance of justice being done would not survive any general impression that a firm of solicitors could readily change side to assist in a criminal prosecution, although they previously advised the accused defendant on many of the issues which are the subject matter of the prosecution.
…
It would in my view offend against established principle, and, indeed, the public interest in the proper administration of justice, if a scheme could be countenanced whereby a group of partners within a firm of solicitors was able to represent a prosecutor in criminal proceedings, in conflict with the duties owed by other partners to the accused person, to the mutual financial profit of all. In my view the undertakings and the proposed Chinese Wall do not preclude the application of the ordinary rules relating to partnerships and fiduciary obligations.” [emphasis added]
Black v Taylor [1993] 3 NZLR 403
70. In the case of Black v Taylor (hereinafter “Black”),[28]a plaintiff in an estate dispute sought to restrain a solicitor from acting for the estate on the basis that it had previously acted for several family members and thus was in receipt of confidential information relevant to the proceeding.
71. The Court ultimately restrained the solicitor on the basis of the Court’s inherent jurisdiction due to the fact that reasonable members of the public would not consider that justice would be done by permitting the solicitor to act against the plaintiff. To that end, Richardson J held at 408:
“An associated consideration is the fundamental concern that justice should not only be done but should manifestly and undoubtedly be seen to be done (R v Sussex Justices, ex parte McCarthy [1924] 1 KB 256, 259 per Lord Hewart CJ; see also R v Racz [1961] NZLR 227 and R v Burney [1989] 1 NZLR 732).
The integrity of our system of justice depends on its meeting those standards. The assessment of the appearance of justice turns on how the conduct in question - here Mr Gazley's wish to be able to act as a counsel for the defendants against MA Taylor - would appear to those reasonable members of the community knowing of that background.
In making that assessment the Court will also give due weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause. The right to the choice of one's counsel is an important value. But it is not an absolute. …” [emphasis added]
72. His Honour concluded at 412:
“The decision to disqualify is not dependent on any finding of culpable conduct on the lawyer's part. Disqualification is not imposed as a punishment for misconduct. Rather it is a protection for the parties and for the wider interests of justice.” The legitimacy of judicial decisions depends in large part on the observance of the standards of procedural justice. Where the integrity of the judicial process is perceived to be at risk from the proposed or continuing representation by counsel on behalf of one party, disqualification is the obvious and in some cases the only effective remedy although considerations of delay, inconvenience and expense arising from a change in representation may be important in determining in particular cases whether the interests of justice truly demand disqualification. [emphasis added]
Kooky Garments Ltd v Charlton [1994] 1 NZLR 587
73. The case of Kooky Garments Ltd v Charlton (hereinafter “Kooky”) involved a proceeding between a landlord and a tenant whereby the issue for determination was whether the tenant had agreed to take up a lease.
74. More particularly the issue as to whether the lease had been accepted required the examination of correspondence sent from the solicitor of the tenant which was marked “without prejudice”. The tenant was represented at trial in the New Zealand District Court and then on appeal in the New Zealand High Court by counsel who was also a solicitor and partner in the firm of solicitors who had written the correspondence.
75. The Court ultimately found in favour of the tenant and made a costs order against the solicitors for the landlord on the basis of the Court’s inherent jurisdiction and the fact that it was inappropriate for them to act in the matter given the conflict of interest. In doing so, the New Zealand High Court stated its observations with respect to the Court’s inherent jurisdiction to supervise the conduct of counsel and it ability to intervene to restrain a practitioner from acting:
“The court is entitled to assume that solicitors and counsel appearing before it possess that independence. Solicitors not only owe a duty to their clients to do the best for them but also owe an overriding duty to the court … As part of their professional responsibility, therefore, solicitors and counsel must ensure that they do not appear in a matter in which they have an actual or potential conflict of interest or where, by reason of their relationship with their client, their professional independence can be called in question." [emphasis added] [29]
Grimwade v Meagher and Others [1995] VicRp 28
76. In Grimwade v Meagher and Others (hereinafter “Grimwade”),[30] the plaintiff in a civil trial sought to restrain the Counsel defendant on the basis that the counsel had previously appeared to prosecute him in separate criminal proceedings. The related criminal proceeding had been overturned by the Court of Appeal with some criticism of the prosecution.
77. The plaintiff was thus concerned that counsel for the defendant in the civil proceeding would use his position to pursue lines or cross-examination designed to justify his conduct in the previous and \overturned prosecutions.
78. Mandie J concluded that there was “a real and sensible risk of a lack of objectivity” by counsel which gave rise both to a risk of unfairness to the defendant in the civil trial and concern for the integrity of the judicial process and the administration of justice. His Honour concluded that:
“A fair minded reasonably informed member of the public would conclude that the proper administration of justice required that the first defendant be prevented from appearing in the said action because of the real risks of lack of objectivity and of conflict of interest and duty … ". [emphasis added]
T & L [2000] FamCA 351
79. In T & L [2000] FamCA 351 a father sought to restrain the solicitors of the Independent Children’s Lawyer on the basis that a former judge who had made adverse remarks regarding the husband’s hostility was now associated with the ICL’s firm, holding the position of “special counsel”.
80. Although there was no evidence of a breach of confidentiality or bias the Court restrained the ICL solicitors on the basis that justice ought not only be done but seen to be done:
“[120]…I consider that a reasonable person in the father's position, learning that the child representative, a partner in a small family law firm, has as "special counsel" to the firm a judge who had made an adverse finding against the father in earlier proceedings, a finding on the very matter in issue in the proceedings, might reasonably feel that the cards were stacked against him. That is, he might reasonably feel that the child's representative would be biased against him. In those circumstances, independence being essential to the role of the child's representative, he might reasonably feel that justice would not be done. I have taken into account the unfortunate consequences that would be entailed if the child's representative is to be removed.
[121] In the end, having weighed up the matters to which I have referred, including the interests of the children, I have concluded that the principle that justice must be seen to be done is of such importance that in this case it is necessary that the child's representative be removed.
[122] It is entirely regrettable that this situation has come about. I have already concluded that there is no substance in the specific complaints by the father against the child's representative. Mr Schroder submitted that the father had already shown hostility to the child's representative and that he has in effect seized on this matter as "another arrow in his quiver" to use the image of Mr Tonge. However, the problem is not of the father's making, and he is entitled to make the argument that the situation resulting from the former judge's position with the firm, in all the circumstances, creates a situation in which justice would not be seen to be done if the child representative is not removed.”
Holborow v MacDonald Rudder [2002] WASC 265
81. In Holborow v Rudder (hereinafter “Holborow”),[31]a defendant sought to restrain the former solicitor of the plaintiff from having any involvement with the proceeding, save for any role as a witness on the basis that former solicitor had a personal interest in the outcome of the proceeding, the determination of which was likely to involve the complaints of professional misconduct against him.
82. At [23] Heenan J held that the power of the Court to restrain a solicitor from acting in an action was not limited to instances involving breaches of confidence, rather the Court had ample power to supervise the conduct of legal practitioners, as officers of the Court. Hennan J provided the following examples:
“In those cases legal practitioners were restrained from acting in various instances where: there was a potential that the legal practitioner might be a witness in the case; where the subject matter of the litigation was likely to involve an evaluation of the conduct of the solicitor concerned and the efficacy of documents prepared by his firm; and where a solicitor was acting for a liquidator in connection with the liquidator's investigations into the prior activities of an insolvent company where the solicitor had, prior to the insolvency, been acting for the company.”[32]
83. At [28] Heenan J set out the appropriate test as follows:
“If there are circumstances which are likely to imperil the discharge of ... duties to a court by a legal practitioner acting in a cause, whether because of some prior association with one or more of the parties against whom the practitioner is then to act, or because of some conduct by the practitioner, whether arising from associations with the client or a close interest which gives rise to the fair and reasonable perception that the practitioner may not exercise the necessary independent judgement, the court may conclude that the lawyer should be restrained from acting, even for a client who desires to continue his service – Clay v Karlson (1997) 17 WAR 493; Wan v McDonald (1992) 33 FCR 491; National Mutual Holdings Pty Ltd v Sentry Corp (1989) 22 FCR 209; Afkos Industries Pty Ltd v Pullinger Stewart [2001] WASCA 372.” [emphasis added]
Bowen v Stott [2004] WASC 94
84. In Bowen v Scott (hereinafter “Bowen”),[33] a plaintiff to an employment and defamation dispute sought to restrain the defendant’s solicitors from acting on the basis of an allegation that the parties, through their solicitors and counsel, compromised the dispute on the first day of trial.
85. In summarising the applicable legal principles the Supreme Court of Western Australia held the following:
“[51] In Williamson v Nilant [2002] WASC 225 McKechnie J said that it was well settled that the Court's inherent jurisdiction to preserve the proper administration of justice extends to restraining a legal practitioner from acting in a particular case. The objective test to be applied in the context of such a case is whether a fair minded, reasonably informed member of the public would conclude that the proper administration of justice required that counsel be so prevented from acting, but at all times giving due weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause.
[52] The relevant principles are affirmed and given further expression in Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 and also in a decision of Steytler J in this Court in Newman v Phillips Fox (a firm) (1999) 21 WAR 309. It emerges from the latter case, that the rationale for intervention upon the third ground is a recognition that the integrity of the legal process and of the Court function might be undermined if it were thought that solicitors or counsel did not possess the objectivity and independence which their professional responsibilities and obligations to the Court require of them.
[53] The most obvious case in that regard would be a situation in which a solicitor had some direct pecuniary interest in the outcome. It might seem to an independent observer that a solicitor, notwithstanding his best efforts to be impartial and objective, might adjust his evidence in some way to procure a result that suited his interest. The decided cases suggest also that the same principles apply in circumstances where a solicitor might feel impelled to justify or defend his conduct in representing a client, notwithstanding that the solicitor did not have any specific pecuniary interest in the outcome other than the obtaining of his professional fees.” [emphasis added]
86. The Court ultimately granted the injunctive relief having being satisfied that the objective test was satisfied:
“[65] I accede to the line of argument put to me by counsel for the plaintiff that there is an objective test to be applied. The circumstances might suggest to a fair minded, reasonably informed member of the public that, if evidence is given of the kind which is likely to be given by the legal practitioners involved in the negotiations, a conflict of interest will arise which might interfere with the proper administration of justice. The practitioners might not be able to conduct themselves with proper objectivity. For that reason, I consider that the principles I have described should be applied as a basis for making the orders sought.”
Kallinicos and anor v Hunt & ors [2005] NSWSC 1181
87. In Kallinicos and anor v Hunt & ors (hereinafter “Kallinicos”),[34] a lawyer who had acted on behalf of a partnership company in respect of transactions which were highly contentious and which lead to litigation between the directors and shareholder sought to act for one of the defendants to the litigation.
88. The plaintiff sought to restrain the lawyer on the basis, that:
(a) firstly, the lawyer might well be exposed to a suit (there were serious allegations of wrong doing on the part of the lawyer);
(b) secondly, the lawyer would almost certainly be a material witness to the proceeding; and
(c) thirdly, the lawyer appeared to have a vested interest in how the evidence turned out.
89. The Court held:
(a) that it had an inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its offices and to control its processes in aid of the administration of justice;
(b) the test to be applied is whether a fair-minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice;
(c) the inherent jurisdiction is exceptional and ought only to be exercised with caution and balanced against the public interest that a litigant ought not be deprived of the lawyer of his or her choice; and
(d) in a proceeding where it was likely that a solicitor for certain defendants would be a material witness on controversial issues of substance, a fair minded reasonably informed member of the public would conclude that the proper administration of justice required that the solicitor not act for the defendants in the proceedings.
Camp & Pace [2009] FMCAfam 1460
90. In the case of Camp & Pace, (hereinafter “Camp”),[35] a wife sought to restrain the husband’s solicitor on the basis that the solicitor had a pecuniary interest in the family law proceeding which would likely result in the husband’s solicitor being called as a witness.
91. The pecuniary interest was said to arise out of an agreement between the husband (who was a solicitor himself) and his solicitor, to purchase the husband’s law firm for “nil” consideration. The wife argued that as a result of the proposed acquisition, the husband's solicitor had a conflicting interest in keeping the value of the practice low for themselves, rather than high for the parties and thus the solicitor could not present his client's case as an independent legal practitioner if he had a direct interest of an asset to the marriage.
92. The husband argued that the law firm had no value because it consisted of 95% legal aid matters which were to be returned. The husband’s solicitors further argued that if any value could be attributed to the firm then it would remain within the Property Pool.
93. The Court ultimately held in favour of the wife by restraining the husband’s solicitors.
94. On the issue of being called as a witness, the Court heavily relied upon the Supreme Court decision of Pearlbran & Anor v Win Mezz No. 19 Pty Ltd & Anor [2009] QSC 292 (per Douglas J) and a further New South Wales Supreme Court decision of Mitchell v Burrell [2008] NSWSC 772 the latter of which the following was stated:
“…I do not accept that the mere circumstance that a solicitor will be a material witness, even on a controversial matter, of itself justifies restraining the solicitor from continuing to act. As Windeyer J pointed out in Scallan v Scallan [2001] NSWSC 1078, it is, for example, not unusual for instructing solicitors in contested probate proceedings to give evidence of facts relevant to instructions for and execution of a Will. Similarly, in contested conveyancing proceedings, it is not unusual for solicitors who have acted on the conveyance to continue to act in the proceedings for specific performance or rescission and to give evidence in those proceedings. Accordingly, despite Rule 19 of The Law Society of New South Wales Professional Conduct and Practice Rules, which imposes a professional obligation (as distinct from a private right), I do not accept that in every case where a solicitor acting for a party is a material witness even on a controversial matter, the Court will restrain the solicitor from continuing to act. Although some observations of Campbell CJ in Chapman v Rogers; ex parte Chapman [1984] 1 Qd R 542, 545, may go somewhat further, the cases indicate – as Campbell CJ did in that case itself – that the line is crossed only when the solicitor has a personal stake in the outcome of the proceedings or in their conduct, beyond the recovery of proper fees for acting, albeit that the relevant stake may not necessarily be financial, but involves the personal or reputational interest of the solicitor, as will be the case if his or her conduct and integrity come under attack and review in the proceedings. The presence of such circumstances will be a strong indication that the interests of justice – which in this field involve clients being represented by independent and objective lawyers unfettered by concerns about their own interests – require the lawyer to be restrained from continuing to act.” [emphasis added]
Naczek & Dowler [2011] FamCAFC 179
95. In the case of Naczek & Dowler (hereinafter “Naczek”),[36] it was held that the existence of a lien in favour of the solicitors over the costs for their unpaid fees did not of itself create a conflict of interest.
PART E – CONCLUSION
96. Some “take-away” points to this article are as follows:
(a) when considering the misuse of confidential information under the First Ground, courts operating in the Family Law jurisdiction have adopted a “Broader Test” whilst courts operating within the Civil Law jurisdiction have adopted a “Narrow Test”. The essential difference between the two tests is that the burden of evidence. In short, the burden of evidence in the Family Law jurisdiction is less than that required within the Civil Law jurisdiction;
(b) a firm operating in the Family Law jurisdiction ought to check that potential new employees, even those performing a non-legal role, are not “conflicted” on the firm’s current matters;
(c) practitioners attending community legal service centres in the Family Law jurisdiction should pay particular attention to potential conflicts which might arise as even taking initial instructions might result in a conflict arising;
(d) practitioners who unduly delay in bringing an application to restrain a solicitor may not succeed in such an application if the Court considers such a delay (and the associated costs) to outweigh the prejudices of the applicant;
(e) the use of “Chinese Walls” (or “Information Barriers” as they are now know) are less likely to stand in the face of allegations which are based upon the Third Ground;
(f) there is some debate as to whether a fiduciary relationship between a solicitor and client extends beyond a retainer. The better view, at least in Queensland, appears to be that a fiduciary relationship ceases to exist upon the end or termination of the retainer, although the obligation of confidentiality remains; and
(g) whilst applications to restrain solicitors are commonly based on a breach of confidential information, it is not a fundamental requirement for injunctive relief. To that end, the Court may exercise its inherent jurisdiction so as to preserve confidence in the administration of justice by the Courts.
Simon Taylor
Brisbane Family Law Barrister
Alfred Lutwyche Chambers
[1] This paper only provides a brief summary of this area of law and should not be considered a full advice. Liability limited by a scheme approved under Professional Standards Legislation.
[2] [2001] VSCA 248; (2001) 4 VR 501; see also Kallinicos v Hunt [2005] NSWSC 1181.
[3] Ibid 521-524 [52]-[58].
[4] See D&J Constructions Pty Ltd v Head and Others trading as Clayton Utz (1987) 9 NSWLR 118 at 123
[5] Stephen Jaques v KPMG Peat Marwick (1990) 4 WAR 357 at 362-3; Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd [1995] 1 VR 1; Farrow Mortgage Services Pty Ltd (in liq) v Mendall Properties Pty Ltd [1995] 1 VR 1 at 5; Spincode Pty Ltd v Look Software Pty Ltd [2001] 4 VR 501; National Mutual Holdings Pty Ltd v Sentry Corporation; Carindale Country Club Estate v Astill and PhotoCure ASA v Queens University at Kingston [2002] FCA 905; 56 1PR 86.
[6] Thevenaz (1986) FLC 91-748; In the Marriage of PA and R M Magro (1989) 12 Fam LR 770; A and B (1990) FLC 92-126; Griffith (1999) FLC 92-233; Kozatz (1993) FLC 92-386; McMillian and McMillan (2000) FLC 93-048.
[7] McMillan and McMillan [2000] FamCA 1046 at [87].
[8] (1882) 1 QLJ 62.
[9] At pp 62 to 63.
[10] [1912] 1 Ch 831.
[11] [1912] 1 Ch 831 at 842.
[12] In Rakusen it was held that an injunction would only be necessary where the Court was satisfied that there was a “real mischief and real prejudice” if the solicitor was allowed to act. Subsequent cases have held that this approach was too “narrow” and that the better test is based upon the less stringent test that injunctive relief is necessary where there exists “real and sensible” possibility of the confidence being abused; see Mallesons Stephen Jacques v KPMG Peat Marwick (1991) 4 WAR 357 per Ipp J at 362 to 363; and Farrow Mortgage Services Pty Ltd (In Liq) v Mendall Properties Pty Ltd and Others [1995] 1 VR 1.
[13] (1986) FLC 91-748; In the marriage of RA and E Thevenaz (1986) 11 Fam LR 95.
[14] Ibid at 96.
[15] In the view of the author solicitors practicing in family law would be best placed to start with the authority of McMillan and McMillan [2000] FamCA 1046.
[16] (1987) 9 NSWLR 118 at 119.
[17] Ibid at 123.
[18] In the Marriage of P A and R M Magro (1989) 12 Fam LR 770.
[19] Ibid at 778
[20] (1990) FLC 92-126.
[21] 14 Fam LR 782 at 792 to 792.
[22] Ibid at 792.
[23] [1995] 1 VR 1.
[24] Ibid at 5.
[25] See McMillan and McMillan [2000] FamCA 1046 at [54].
[26] [2000] FamCA 1046.
[27] (1990) 4 WAR 357.
[28] [1993] 3 NZLR 403.
[29] Ibid at 590; cited in Grives & Tully [2011] FamCA 617 at [85].
[30] 1995] VicRp 28.
[31] [2002] WASC 265.
[32] Ibid at [23].
[33] [2004] WASC 94.
[34] [2005] NSWSC 1181.
[35] [2009] FMCAfam 1460.
[36] [2011] FamCAFC 179.